Quantum-chemical calculations at the B3LYP level have been carried our to elucidate the reaction mechanism of the epoxidation of ethylene with the molybdenum diperoxo complex MoO(O-2)(2)OPH3. All relevant transition states and intermediates which belong to the reaction pathways suggested by Mimoun and by Sharpless were optimized. The calculations show that there is no reaction channel from the ethylene complex tb the putative metalla-2,3-dioxolane intermediate as suggested by Mimoun. There is a transition state for the direct formation of the five-membered cyclic intermediate from ethylene and the diperoxo complex. However, the subsequent extrusion of a C2H4O species from the metalla-2,3-dioxolane does not yield the epoxide but acetaldehyde. The calculations show that the reaction of MoO(O-2)(2)OPH3 with ethylene can directly lead to the epoxide as suggested by Sharpless; The activation energy for the latter process is 15.2 kcal/mol, which is lower than the barrier for the formation of the metalla-2,3-dioxolane (23.7 kcal/mol). Calculations with the ligand OPMe3 instead of OPH3 show an even larger preference of the pathway leading to the epoxide than the formation of the five-membered ring. The calculations strongly support the mechanism suggested by Sharpless, while the Mimoun mechanism leads to carbonyl compounds as reaction products. Examination of the electronic structure of the transition state of the epoxide formation with the Charge Decomposition Analysis shows that the reaction should be considered as nucleophilic attack of the olefin toward the sigma* orbital of the peroxo bond.